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Asian Review of Financial Research, Vol., No..
pp.358~402
pp.358~402
On market timing and stock selection performance : Evidence from Korean fund markets
Yun, Young Sup Korea University
Son, Pan Do Korea University
Kim, Sung Shin Korea University
Whether fund managers exhibit superior performance has drawn much attention among academics and practitioners. Since Jensen proposed an evaluation method based on the market model in 1968, many empirical studies have been trying to identify market timing and stock selection abilities for mutual fund managers. The early studies employing return-based timing measures for their tests generally show evidence of little or no market timing ability and somewhat positive stock picking ability for mutual fund managers in the U.S., UK, Australia, and others. In contrast, more recent studies utilizing holdings-based measures, most notably the Jiang, Yao, and Yu (2007, JYY) study, suggest that US mutual fund managers have strong positive market timing ability. In this paper, we investigate whether Korean fund managers have market timing and stock selection skills for the 11/ 2001 ? 12/2007 period. This study is the first comprehensive study on the performance evaluation of Korean fund managers, as it deals with a most complete sample of fund holdings compiled to date, and as it uses holdings-based tests as well as return-based tests as JYY does. Our empirical results support that on average, actively managed Korean fund managers have positive market timing and stock selection abilities. In addition, we find that stock selection ability is affected by market timing ability over time and that market timers tend to tilt toward small fund size, low turnover, high industry concentration, and large capital stocks and that equity funds use private information to predict market returns.
Yun, Young Sup
Son, Pan Do
Kim, Sung Shin
Whether fund managers exhibit superior performance has drawn much attention among academics and practitioners. Since Jensen proposed an evaluation method based on the market model in 1968, many empirical studies have been trying to identify market timing and stock selection abilities for mutual fund managers. The early studies employing return-based timing measures for their tests generally show evidence of little or no market timing ability and somewhat positive stock picking ability for mutual fund managers in the U.S., UK, Australia, and others. In contrast, more recent studies utilizing holdings-based measures, most notably the Jiang, Yao, and Yu (2007, JYY) study, suggest that US mutual fund managers have strong positive market timing ability. In this paper, we investigate whether Korean fund managers have market timing and stock selection skills for the 11/ 2001 ? 12/2007 period. This study is the first comprehensive study on the performance evaluation of Korean fund managers, as it deals with a most complete sample of fund holdings compiled to date, and as it uses holdings-based tests as well as return-based tests as JYY does. Our empirical results support that on average, actively managed Korean fund managers have positive market timing and stock selection abilities. In addition, we find that stock selection ability is affected by market timing ability over time and that market timers tend to tilt toward small fund size, low turnover, high industry concentration, and large capital stocks and that equity funds use private information to predict market returns.
actively managed fund,market timing,stock selectivity,return-based timing measure,holding-based timing measure,the Fama-French three factor model,the Carhart four factor model